MMT On Inflation

Posts in this series
The Deficit Myth By Stephanie Kelton: Introduction And Index
Debunking The Deficit Myth

The second chapter of Stephanie Kelton’s The Deficit Myth deals with inflation. In Chapter 1, Kelton explains that the deficit is not a constraint on government spending. Instead, inflation is the important constraint. A deficit does not prove that the federal government is overspending. Only an increase in inflation proves Congress is overspending. Kelton says Congress shouldn’t tax and spend so as to deliver a balanced budget. Congress should spend and tax so as to deliver a balanced economy, one that serves all of us. She says that historically we have not done this, that we have chosen to focus of deficits and in so doing our economy has not served us well.

Definition and Description of Inflation

Inflation means a continuous rise in the price level. A bit of inflation is considered harmless and even something economists like to see in a healthy, growing economy. But if prices start rising faster than most people’s incomes, it means a widespread loss of purchasing power. Left unchecked, this would mean a decline in society’s real standard of living. In extreme cases, prices can even spiral out of control, gripping a country in hyperinflation. P. 44.

The danger of eroding incomes explains why everybody worries about inflation, and explains why politicians can use the threat of inflation to terrorize voters. It works, even though the problem for more than a decade hasn’t been too much inflation, it’s been too little. Ever since the Great Crash inflation has been less than 2% annually despite efforts of the Fed.

Kelton says that economists think of inflation as either cost-push or demand-pull. Demand-pull inflation occurs when consumer spending rises faster than the economy can produce goods and services. That hasn’t been a problem for a long time. Cost-push inflation can arise from disasters, which reduce the supply of something; from pricing power, as in the case of Big Pharma with its patents and trade secrets; or from workers gaining market power and demanding higher wages which businesses pass on to consumers. That last one is the only fear mainstream economists suffer, as far as I can tell.

The dominant theory of inflation stems from Milton Friedman’s monetarism:

According to Friedman, “inflation is always and everywhere a monetary phenomenon.” What he meant was that too much money is the culprit in any inflationary episode. If prices weren’t stable, it was because the central bank was trying to force the economy to create too many jobs by allowing the money supply to increase too rapidly.

The early neoliberal Friedman insisted that the Fed must never interfere with the workings of the market. Specifically, the Fed should not try to reduce unemployment below a certain level, which came to be called NAIRU, the non-accelerating inflationary rate of unemployment. Friedman thought there had to be some minimum level of unemployment in the economy. [1] The Fed bought into this view, as did politicians of all stripes. They all agreed that to keep prices stable, the US has to accept a certain level of unwanted unemployment. And to be on the safe side, maybe a bit higher level of unemployment. In practice, Congress dumped the problems of inflation and unemployment on the Fed.

But problems arose. The NAIRU isn’t visible or measurable. It can only be seen in retrospect. And now we are pretty sure there isn’t a clear relationship between inflation and unemployment, as the Fed assumed. [2] The Fed Chair, Jerome Powell, freely admitted to Rep. Alexandria Ocasio-Cortez that the Fed has been wrong about NAIRU, but defended its use on the grounds that “We need to have some sense of whether unemployment is high, low or just right.” P. 53.

2. The Problem of Unemployment

It turns out that the Fed used the purported correlation between inflation and unemployment as its primary tool for controlling inflation, ignoring all other causes of inflation. When the economy heated up and unemployment dropped, workers gained market power, and their share of national income increased. That led the Fed to raise interest rates leading to a tightening of the economy and usually a recession, as the following chart shows.

Gray bars indicate recessions.


Kelton calls this a “human sacrifice”, forcing some people out of the workforce when they want to work and can be productive. She thinks we are asking too much of the Fed. It can’t spend money into the system; only Congress can do that. All the Fed can do is change the cost of borrowing. If unemployment is too high, the Fed can make borrowing cheaper, but it can’t force anyone to borrow. Usually when unemployment is high, no one wants to borrow. I note that this was what happened after the Great Crash. The Fed cut interest rates to zero and lowered bank reserve requirements, hoping to increase money going into the economy. It didn’t work.

3. The Job Guarantee

Kelton argues that a better way to deal with unemployment is a job guarantee. Every person who wants to work should be able to get a decent job with decent pay and decent benefits. If the private sector won’t provide those jobs, the government should. [3] Kelton discusses this idea and its foundations.

It would probably be impossible for Congress to monitor the economy closely enough to manage full employment by tweaking taxes and spending. A job guarantee would act as a safety-valve and an automatic stabilizer for the economy and help solve this problem, leaving the Fed free to focus on inflation. If the private sector needs all the workers it can find them. If not, the government hires people to do jobs that need doing. There is plenty of work that needs doing, and, as Kelton pointed out elsewhere, we can always use more flowers in our parks and boulevards.

4. Preventing Inflation

So how should Congress budget knowing that the only effective constraint on spending is inflation? What would change? The way Congress currently works is that every bill that calls for expenditures gets a score from the Congressional Budget Office that assesses the impact of the expenditure on the deficit over a ten-year period. If inflation were the constraint, then the CBO would offer a score based on the probable impact of the expenditure on inflation. If the economy is, as now, operating well below its capacity for producing goods and services, the possibility of inflation would be low.

If the economy is close to capacity, either as a whole or in part related to the area of expenditures, then Congress has to make hard calls. How important is the expenditure? Can we create “fiscal space” for the expenditure with taxes? For example, in the case of the entire economy humming along, a general income tax hike would take money out of most people’s hands so they would not be buying as much, leaving room for the government to buy more. If there is a bottleneck, a more focused tax or some other step might be necessary.

Conclusion

MMT recognizes that inflation is a crucial problem. It shows how it arises and how we should protect ourselves from it.

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[Graphic via Grand Rapids Community Media Center under Creative Commons license-Attribution, No Derivatives]

[1] Marx said that the reserve army of labour is a necessary part of capitalism. Hmmm.

[2] This relationship is embodied in the Philips Curve. I discuss it here.

[3] Other economists favor a universal basic income. Both have the added benefit of freeing workers from abusive or irritating employers. Your family won’t starve if you walk out on a bad situation.

Debunking The Deficit Myth

Posts in this series
The Deficit Myth By Stephanie Kelton: Introduction And Index

The first chapter of Stephanie Kelton’s book The Deficit Myth takes up the biggest myth about federal government finances, the idea that federal budget deficits are a problem in themselves. The deficit myth is rooted in the idea that the federal government budget should work just like a household budget. A family can’t spend more than its income will support. The family has income, and may be able to borrow money, and the sum of these sets the limit on household spending. Those who propagate the deficit myth say government expenditures should be constrained by the government’s ability to tax and borrow. First the government has to find the money, either through taxes or borrowings, and only once it has found the money can it spend. The way things actually work is different.

In the real world, it goes like this. Congress votes to direct an expenditure and authorize payment. An agency carries out that direction. The Treasury instructs the Fed to pay a vendor. The Fed makes the payment by crediting the bank account of the vendor. That’s all that happens. It turns out that the real myth is that the Treasury had to find the money before the Fed would credit the vendor. That’s because the federal government holds the monopoly on creating money. U.S. Constitution Art. 1, §§8, 10. In practice this power is given to the Treasury, which mints coins, and to the Fed, which creates dollars. [1]

It also turns out that for the most part, the Treasury does cover the expenditure by taxing or borrowing, but because the government is an issuer of dollars, it isn’t necessary. [2] In the last few months, the Treasury has been selling securities and the Fed has been buying about 70% of them. Here’s a chart from FRED showing Fed holdings Fed holdings of treasury securities. The Fed may or may not sell those securities to third parties. If it doesn’t, they will be held to maturity and remitted as a dividend to the Treasury.

The recognition that spending comes first, and finding the money comes second is one of the fundamental ideas of MMT. Kelton describes her meeting with Warren Mosler who introduced her to these ideas; the stories are amusing and instructive. I particularly like this part:

[Mosler] began by referring to the US dollar as “a simple public monopoly.” Since the US government is the sole source of dollars, it was silly to think of Uncle Sam as needing to get dollars from the rest of us. Obviously, the issuer of the dollar can have all the dollars it could possibly want. “The government doesn’t want dollars,” Mosler explained. “It wants something else.”

“What does it want?” I asked.

“It wants to provision itself,” he replied. “The tax isn’t there to raise money. It’s there to get people working and producing things for the government.” Pp. 24-5.

Put a slightly different way, people accept the government’s money in exchange for goods and services because the government’s money is the only way to pay taxes imposed by the government. Kelton says she found this hard to accept. She spent a long time researching and thinking about it, and eventually wrote her first published peer-reviewed paper on the nature of money. [3]

The monopoly status makes governments the issuers of money, and everyone else is a user. That fundamental difference means that governments have different financial constraints than households, and that it certainly isn’t constrained by its ability to tax and borrow. Kelton offers several interesting and helpful analogies that can help people grasp the Copernican Revolution that this insight entails.

Once we understand that government doesn’t require tax receipts or borrowings to finance its operations, the immediate question become why bother taxing and borrowing at all. Kelton offers four reasons for taxation.

1. Taxation insures that people will accept the government’s money in exchange for goods and services purchased by the government.
2. Taxes can be used to protect against inflation by reducing the amount of money people have to spend.
3. Taxes are a great tool for reducing wealth inequality.
4. Taxes can be used to encourage or deter behaviors society wants to control. [4]

She explains borrowing this way: government offers people a different kind of money, a kind that bears interest. She says people can exchange their non-interest-bearing dollars for interest bearing dollars if they wish to. “… US Treasuries are just interest-bearing dollars.” P. 36. Let’s call the non-interest-bearing dollars “green dollars”, and the interest-bearing ones “yellow dollars”.

When the government spends more than it taxes away from us, we say that the government has run a fiscal deficit. That deficit increases the supply of green dollars. For more than a hundred years, the government has chosen to sell US Treasuries in an amount equal to its deficit spending. So, if the government spends $5 trillion but only taxes $4 trillion away, it will sell $1 trillion worth of US Treasuries. What we call government borrowing is nothing more than Uncle Sam allowing people to transform green dollars into interest-bearing yellow dollars. P. 36-7.

It might seem that there are no constraints, but that is not so. Congress has created some legislative constraints on its behavior, including PAYGO, the Byrd Rule, and the debt ceiling, but these can be waived, and always are if a majority of Congress really want to do something. They also serve as a useful way of lying to progressives demanding public spending on not-rich people, like Medicare For All. We have to pay for it under our PAYGO rules, they say, while waiving PAYGO for military spending (my language is harsher than Kelton’s).

The real constraints are the availability of productive resources and inflation. The correct question is not “where can we find the money”, but “will this expenditure cause unacceptable levels of inflation” and “do we have the real resources we need to do this” and “is this something we really want to do. As Kelton puts it, if we have the votes, we have the money.

In my next post, I will examine some of these points in more detail. Please feel free to ask questions or request elaboration in the comments.

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[Graphic via Grand Rapids Community Media Center under Creative Commons license-Attribution, No Derivatives]

[1] Art. 1, §8 authorizes the federal government to create money; §10 prohibits the states from issuing money. That leaves open, for now, the possibility that private entities can issue money. Banks and from time to time other private entities play a role in the creation of money, but I do not see a discussion of this in the book.

For those interested, here’s a discussion of the MMT view from Bill Mitchell. I may take this up in a later post. In the meantime, note that every creation of money by a bank loan is matched by a related asset. Thus, bank creation of money does not increase total financial wealth. In MMT theory this is called horizontal money. It is contrasted with vertical money representing the excess of government expenditures over total tax receipts, which does increase financial wealth. Here’s a discussion of this point.

[2] There are, of course, constraints on government spending, especially inflation and resource availability. We’ll get to that in a later post.

[3] Kelton cites the paper in a footnote: The Role Of The State And The Hierarchy Of Money.

[4] Compare this list to the list prepared by Beardsley Ruml, President of the New York Fed, in 1946.

The Deficit Myth By Stephanie Kelton: Introduction and Index

Posts in this series.
The Deficit Myth By Stephanie Kelton: Introduction And Index
Debunking The Deficit Myth
MMT On Inflation
Reflections On The Deficit Myth
The National Debt Is Soooooo Big
The Wonkish Myth Of Crowding Out
MMT On International Trade
Social Security And Other Entitlements
Reviews Of The Deficit Myth

The last two chapters of Stephanie Kelton’s The Deficit MythThe Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy is now available, and I will be discussing it in a series of posts. [1]

Kelton lays out the structure of the book in her Introduction. She starts with a common bumper sticker approach to the federal deficit: Uncle Sam looking abashed while holding out his pockets to show they’re empty. That image dominates most discussion of budgeting in the US. It depicts an individual facing the limits of personal finance. It relies on this image to create panic about federal deficits. This is the dominant view among politicians of both parties. In a New York Times opinion piece, Kelton reminds us that a group of 60 Congressmen, 30 from each legacy party, are terribly worried about the deficit. This kind of deficit hawkery hit President Obama in 2010 after the weak financial stimulus offered by Democrats after the Great Crash.

That month, in his State of the Union address, he committed to a reversal of fiscal stimulus, telling the nation, “Families across the country are tightening their belts and making tough decisions. The federal government should do the same.” What followed was a sustained period of self-inflicted harm.

These 60 legislators learned nothing from the misery created by Obama’s turn to austerity, and just like Obama are prepared to hurt Americans in desperate need of assistance following the collapse of the economy, a pandemic, and political upheaval. These supposedly principled people couldn’t agree on actual proposals to increase taxes or cut programs.

Instead, they called for the Government Accountability Office to issue an annual report detailing the government’s fiscal health. They also endorsed legislation introduced last year that would create “rescue committees” to recommend fixes for Social Security, Medicare and other trust funds that are projected to become insolvent.

And they called for adopting goals for managing the debt, such as setting a limit based on its share of the economy. Such a move, they said, “would reduce debt-limit brinkmanship as long as the budget remains on a responsible path.”

It would serve them right if the GAO read Kelton’s book and concluded, as she does, that they are dangerously wrong. By the way, the Fed disagrees with these spineless wonders, and says more fiscal stimulus is needed. It goes without saying that the Fed is more likely to be right than legislators mired in the economics and politics of the past.

Kelton calls for a Copernican Revolution:

MMT changes how we view our politics and economics by showing that in almost all instances federal deficits are good for the economy. They are necessary. P. 7.

There is no doubt that Modern Monetary Theory would require a revolutionary change in our understanding of economics. Here’s a tweet from Paul Krugman [2]:

No revolutionary thinking needed says Krugman, carry on. I assume this is a reference to Krugman’s general view that the US can borrow cheaply thanks to the low interest rates set by the Fed, and that bonds will be issued to “pay for” economic support. That’s not what’s happening. The Fed is buying the securities issued by the Treasury to “pay for” whatever Congress said to pay for. Between February 27 and May 31, the national debt increased $2.4 trillion while Fed holdings of treasuries increased by $1.657 trillion. [3] In other words, the Fed bought about 70% of the new issuance, simply by marking up the Treasury’s account at the Fed. That’s blatantly creating money out of thin air. It’s important to add that no one is going to pay off the securities owned by the Fed unless the Fed decides to sell them to third parties. I wonder if the 60 Representatives who signed that letter know that. Or care. Or understand why it’s relevant.

Kelton takes up six myths about the economy in her book.

1. The US government should budget itself like a household.
2. The deficit is evidence of overspending.
3. Deficits will burden the next generation.
4. Deficits crowd out private investment undermining long-term growth.
5. Deficits make the US dependent on foreign investment.
6. Entitlements will cause a huge future problem.

Then she discusses our real crises:

The fact that 21 percent of all children in the United States live in poverty—that’s a crisis. The fact that our infrastructure is graded at a D+ is a crisis. The fact that inequality today stands at levels last seen during America’s Gilded Age is a crisis. The fact that the typical American worker has seen virtually no real wage growth since the 1970s is a crisis. The fact that forty-four million Americans are saddled with $1.7 trillion in student loan debt is a crisis. And the fact that we ultimately won’t be able to “afford” anything at all if we end up exacerbating climate change and destroying the life on this planet is perhaps the biggest crisis of them all. These are real crises. The national deficit is not a crisis. P. 11-12.

And I’ll add one more: the grotesque skewing of wealth and income to white poeple is a crisis.

This book is a joy to read. It’s written for non-economists. The language is lucid and precise, with no jargon. I hope people will discuss it in the comments as I move through it. I’ll try to answer any and all questions to the best of my ability.

I will also add my own comments, but I will separate my thinking from Kelton’s. I know of two areas I want to discuss in more detail. First, as I see it MMT is an example of a pragmatic approach to the study of economics. I offer a primer on pragmatism in three posts, here, here, and here. In contrast, mainstream economics rests heavily on Bentham and Mills’ Utilitarianism, but it’s buried deeply in the history of economics, and is never discussed as a normative principle. For an introduction to this area, search the site for William Stanley Jevons.

The value of pragmatism is that it strives to be non-normative. It leaves discussion of what should we do to political or some other discourse. Mainstream economics claims to know how things should be: the market is all-knowing and politics should never interfere with its operation.

This book lays out an argument for MMT as the foundation for an economics for progressives. It offers an understanding of the way our government funds itself which can free us from the constraints demanded by the rich and powerful. It shows us how to use federal monopoly control over money for the benefit of all of us, not just the filthy rich. With this book, we can master the basic concepts and teach them to our friends and neighbors, and especially to our politicians.
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[1] My original plan was to discuss John Dewey’s The Public and Its Problems, but that was derailed by a bad case of quarantine brain. I’ll return to that excellent book next. One of the reasons to discuss that book is that Dewey, the leading pragmatist, opens with a discussion of that theory.
[2] I replied to this tweet.
[3] The Fed’s weekly balance sheets are here. Debt figures from the Treasury are here.

[Graphic via Grand Rapids Community Media Center under Creative Commons license-Attribution, No Derivatives]

Deficit Hawks Screeching In The Background

The deficit harpies are warming up in the background. [1] Inflation is just around the corner, they shriek, by which they mean Democrats might take over government. There must be a handbook in which their arguments are laid out probably in red ink. They claim that whatever the Fed and the Treasury do to help anyone has to be paid for sooner rather than later by increasing taxes. Those taxes will fall heavily on the capitalists, which (or who) will destroy economic growth. They claim the government is sucking up all the investment capital, which chokes growth. They say the vast amount of debt will hurt the standing of the US in international finance. It’s predictable and this time it’s silly.

1. The numbers. Congress has authorized $2.2 trillion in spending to deal with the economic impact of the Covid-19 crisis. That’s on top of other spending in a budget originally proposing a deficit of $!.1 trillion. With other spending on Covid-19 issues and reduced tax revenue, the current estimate for fiscal 2020 is about $3.8 trillion. We can reasonably assume another $1 trillion will be needed for states and municipalities, treatments and vaccines, and support for hospitals.

2. Funding Covid-19 expenditures. The US deficit is funded by the sale of US Treasury obligations. Sales are handled by a group called Primary Dealers, who act as market makers in Treasury securities. [3] In the past most of the debt is has been purchased by financial institutions for their own accounts or for the accounts of investors, or by the central banks of other countries. In the current crisis, the Fed has promised to buy all the Treasury debt. Here’s a good explainer. [2]

To get a picture of the situation, in the two months ended 30 April 2020, the national debt held by the public increased by $1.645 trillion. In the comparable period the Fed’s holdings of Treasuries increased by $1.448 trillion. The projected deficit during that period was about $183 billion, so we should estimate the increase in the total debt includes that amount. If we deduct that, we get an estimate of the amount of debt issued on account of the Covid-19 crisis of $1.462 trillion, meaning that the Fed purchased substantially all of the Covid-19 debt.

3. So what? The fear-mongering is based on two speculations: that the federal debt will have to be paid, or that interest rates will somehow increase, and either will have to be paid out of current tax revenues. In either case, we will have to increase taxes. [5] Another theory is that the Fed will have to sell off the Treasuries it bought into the private markets which will be bad for some reason.

The good news is that the Fed can just return the Treasuries to the Treasury in the form of a dividend, or a remittance in Fed parlance, and the debt drops by a like amount. Or the Treasury could pay off the securities and the Fed could remit that payment to the Treasury. If the Fed wants to hold the securities to help it control interest rates or for other reasons, it can just remit the interest payments to the Treasury.

Why would anyone think otherwise? That is the power of neoliberal ideology, which has taken root in the minds of practically every media personality and Twitter economist. There was a moment after the Great Crash when similar questions were raised, but no one paid any attention to see what happened after that, which was a big fat nothing.

It’s possible that the Treasuries aren’t the problem, it’s all the trillions of new dollars flooding the world that will cause inflation. This might actually happen in different circumstances, so it requires a bit of explanation.

1. Demand has fallen dramatically as we cope with lockdown, and in turn, income to business and working people have collapsed. This new money is largely going to people and businesses who need it to replace part of the income they would usually derive from their normal business activities or from employment. It won’t create new demand as it might have six months ago. It just replaces lost income, enabling people and businesses to avoid bankruptcy. It’s true that there are inflationary pressures on certain things, such as medical supplies and equipment. That’s just normal capitalist price-gouging, and unlike similar cases, say, lumber after hurricanes, won’t be prosecuted.

2. Most US business sectors are oligopolies, meaning that three or four companies control 80% or more of revenues. This is certainly true in the medical sector, including the drug business. Thus, salvaged demand paid for by the new money will flow to capitalists. It may be that some will be needed to expand production in some areas and reduce production in others. The rest will go to capitalists, in the same way the Trump tax cuts did, in the form of dividends and stock buy-backs. It is highly unlikely to have a serious inflationary effect.

3. If, however, there were a problem, there is a solution. Congress can increase taxes. The good news is that it can do so in a way that won’t actually impact working people. Congress can hike taxes on the capitalists and on capital.

a. This makes sense in an oligopolistic economy, which is by definition not competitive. When capital flows into oligopolistic businesses, some of the money goes into some new productive use. The rest goes to capitalists. Taxing oligopolistic profits away means that there won’t be inflation in the things only capitalists buy, giant yachts, private jets, politicians, and political favors, for example. Taxing them is doing a service in tamping inflation that only affects them.

b. Republicans will choke on tax hikes. But if inflation driven by all the new money is a problem, it’s one they caused. They threw away any claim to their version of fiscal responsibility when they cut taxes on the rich in the middle of an expansion. If inflation arises, they can’t expect the Fed to fix it for them, because they wouldn’t be able to survive the depression that would cause, just as Carter couldn’t survive the Volcker recession.

c. If this sounds like a layman’s take on Modern Money Theory, well, it is. I hope I got it right.

Update: Shortly after I posted this I saw this headline in the Washington Post: Top White House advisers, unlike their boss, increasingly worry stimulus spending is costing too much.
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[1] Here are some examples. This is a fairly restrained version. Here’s one from the Federalisr; I read it so you don’t have to, it’s ridiculously wrong on everything, including the conclusion:

In summary, the newly proposed bailout and stimulus packages smack of big government welfarism and crony capitalism. These are the sort of policies that will move the needle toward socialism, impoverishing us and stripping the productive engines of our economy.

I think the writer is worried about our precious national bodily fluids.

Here’s one from a columnist for the Arizona Republic, saying that this is bad, bad, even if the guy has been expecting disaster his entire career. It’s easy to see how this guy scared himself with numbers.

Here’s one explaining that the Fed buying municipal securities from towns and states shifts tax burdens to national taxpayers. That’s aimed specifically at my home state, Illinois, and I hope every shithead who makes this argument loses 75% of their deferred income. Here’s one from the occasionally sober SeekingAlpha.

One more from USA Today, complete with towering red bar graphs.

[2] After the Great Crash, the Fed made a similar promise. Buying and selling Treasuries is one way the Fed controls interest rates. And it’s worth noting that Treasuries are often used by financial institutions in various short-term transactions, such as repurchase agreements, and as collateral for short-term loans, rather than as investments or savings.

[3] Here’s the Wikipedia entry on Primary Dealers, which lists the current dealers.

[4] The Fed’s weekly balance sheets are here. Debt figures from the Treasury are here.

[5] This idea never surfaced from the Republican wing of deficit hawkers when the Republicans insisted on tax cuts in the middle of an economic expansion. And for Grover Norquist, I note that a government small enough to drown in a bathtub has proven to be a nightmare in responding to Covid-19. Norquist and his groupies drowned the federal government’s administrative ability to cope with the pandemic.

Where’s the Beef? Republicans Don’t Understand Critical Infrastructure and Supply Chains

Over five weeks of a mostly-national shutdown, we never figured out how to protect essential workers.

By April 9, at least 9,000 health care workers — people trained in the proper use of personal protective equipment — had the virus and at least 27 health care workers had died. More than half had no known exposure to COVID outside of their work.

During the period of the shutdown, outbreaks occurred throughout the meatpacking industry, leading to shutdowns in a number of factories.

As a result, we’ve got meat shortages even as farmers have nowhere to sell their livestock. There were reports that a fifth of Wendy’s restaurants have run out of beef.

Stephens analyst James Rutherford said that a study of online menus for every Wendy’s location nationwide revealed that 1,043 restaurants — or 18% of its national footprint — have listed beef items as out of stock. More than 100 locations are still selling Wendy’s chili, which contains beef.

The shortages vary by state. Hundreds of Ohio, Michigan, Tennessee and New York restaurants are out of beef, while other states’ menus do not indicate any supply chain issues.

A Tectonix GEO analysis shows one reason why: people from one of the heavily affected areas traveled throughout the country. That suggests one possible way COVID has spread to a bunch of relatively remote factories was truckers serving the industry. I’ve heard inspectors also likely spread the virus between factories.

There were COVID clusters in a number of other professions that remained open during the shut-down: cops, prison guards, public transport workers, grocery store workers.

We never figured out how to protect these critical workers when it was relatively easy, when they and other essential workers made up most of the people on public transportation, when they were the only people relying on child care. That’s partly because we never managed to get the PPE and test and tracking systems in place to keep them safe.

And as a result, as the meat industry shows, our failure to protect critical workers has led to strains in a key part of our food supply chain, impacting consumers and suppliers up and down that supply chain.

Coronavirus has even threatened parts of our economy more directly responsible for keeping people alive. Before we shut down, for example, our Air Traffic Control was buckling, as the virus spread among workers in the close spaces of control towers.

If we were a sane nation, focused on the public good rather than bottom line dollars, we would have spent the five weeks of national shut-down figuring out how to protect critical workers and implementing those systems wherever workplaces had not shut down. We would have used that time to test the system and build up stocks of PPE and test kits needed to replicate the system in other, less essential work places. We would have perfected systems for keeping workers safe in the time of COVID, so we could learn how to do it while it was relatively easy, giving us something to replicate when the economy reopened.

We’re not a sane nation. We’re largely not focused on the public good.

And as a result, during the entire five weeks of the shutdown, we watched in fascination at what happens when you continue to work without implementing adequate measures to limit the spread of COVID without taking the obvious lessons from it. Again, we watched that happen at a time when it would have been easier to protect critical workers, because they were interacting with a limited number of other people. As the economy reopens, it will get harder to protect such workers, because there will be more people using public transportation and in grocery stores and relying on child care, increasing the likelihood that a single case can spread to more people, each potentially leading to the shut-down of an entire workplace three weeks later.

By failing to solve the problem of how you protect workers, those rushing to reopen the economy have set this country up for key failures in our rickety supply chain. Some of those failures will be nuisances, with factories idled because they’re missing a key part or shortages of non-essential items in stores. Some of the failures could lead to further health consequences. Some failures may happen in industries where workers are a lot harder to replace quickly. Those failures will make it harder for businesses that are open, as any outbreak will add to already inflated costs of operating, to say nothing of the blow to confidence such failures will bring.

It turns out, a lot of Republicans don’t understand how our economy works (though the same misunderstandings lay behind their opposition to bailing out the auto industry in 2008). They don’t understand that if critical parts of our fragile system break down, other parts begin to break down, potentially setting off a chain reaction.

And as a result, they’re rushing back to reopen the economy without first having done the basic things needed to operate businesses safely.

Yes, we need to take steps reopen the economy for the sake of the economy and our collective sanity. Which is why it was so important for the Federal government to put the pieces in place that would facilitate reopening the economy during the shut down. Only, the Trump Administration did not do that. It squandered the sacrifice made by the 33 million Americans who lost a job in that period. Now, not having put those pieces in place, the Trump Administration is pushing to reopen the world’s largest economy relying on little more than homemade masks to keep it running.

Live and Let Die: The Data Manipulation Begins

From the beginning of the coronavirus crisis, various entities in the United States were always engaged in the kind of dishonesty we accuse China of to hide the extent of the virus. Trump tried to keep a cruise ship off shore so it wouldn’t count against “his” numbers. States everywhere didn’t reveal the crises in nursing homes by hiding where they were occurring. Other states refused to track known COVID-19 deaths because they didn’t occur in a hospital.

But now that Trump has fully committed to reopening the economy before the shut down has its desired effect, he and allied governors are engaged in more aggressive data manipulation to hide the stupidity of what they’re doing.

Georgia had long manipulated its data, by rigging cut-off numbers to make it look like the only outbreaks were around Atlanta and in the Black Belt outbreak around Albany. But as Brian Kemp moved to reopen Georgia in the stupidest possible way, the state shifted its reporting to show confirmed cases.

That means it can always show a trend of declining cases that would match White House guidelines for reopening, rather than the plateau the state actually has, because the trend reflects known cases that aren’t counted yet.

Interestingly, Georgia may also be hiding the extent to which this virus has moved beyond predominantly African-American areas, thereby hiding that Kemp’s stupid decision is actually killing white people, too.

Meanwhile, Arizona’s Doug Ducey, who already lost the state’s experienced emergency manager, just ordered some  epidemiologists at the state’s public universities to stop work on a COVID model that used the states internal data, because their model showed the only way to avoid exponential growth would be to stay closed until the end of May.

The universities’ model had shown that reopening at the end of May was the only scenario that didn’t dramatically increase cases.

In late April, Tim Lant, a mathematical epidemiologist at ASU, said the model showed five different scenarios for how the disease could progress in Arizona, depending on how social distancing efforts were relaxed.

The slowest curve, based on if the state reopens at the end of May, is “the only one that doesn’t put me immediately back on an exponential growth curve,” Lant said in April. That’s because transmission rates would be lowest at that time, he said.

“I can say, scientifically, no, it’s not safe to reopen unless you’re planning on, you know, shutting down again after a couple of weeks, and we can help figure out what the appropriate amount of time is to stay open before we shut down,” he said.

Bailey wrote that health department leadership asked the team to “pause” all work on projections and modeling. The department would also be ending access to special data sets the modeling team had been using for their efforts, Bailey said.

Finally, yesterday the White House tweeted out the model that is has embraced in lieu of models by epidemiologists.

This release is an effort to rebut WaPo reporting on how this model — by the guy behind the Dow 36,000 book, Kevin Hassett — continues to be pulled out of Hassett’s ass whenever Trump needs to be told something he wants to hear.

The epidemiological models under review in the White House Situation Room in late March were bracing. In a best-case scenario, they showed the novel coronavirus was likely to kill between 100,000 and 240,000 Americans. President Trump was apprehensive about so much carnage on his watch, yet also impatient to reopen the economy — and he wanted data to justify doing so.

So the White House considered its own analysis. A small team led by Kevin Hassett — a former chairman of Trump’s Council of Economic Advisers with no background in infectious diseases — quietly built an econometric model to guide response operations.

Many White House aides interpreted the analysis as predicting that the daily death count would peak in mid-April before dropping off substantially, and that there would be far fewer fatalities than initially foreseen, according to six people briefed on it.

Although Hassett denied that he ever projected the number of dead, other senior administration officials said his presentations characterized the count as lower than commonly forecast — and that it was embraced inside the West Wing by the president’s son-in-law, Jared Kushner, and other powerful aides helping to oversee the government’s pandemic response. It affirmed their own skepticism about the severity of the virus and bolstered their case to shift the focus to the economy, which they firmly believed would determine whether Trump wins a second term.

[snip]

By the end of April — with more Americans dying in the month than in all of the Vietnam War — it became clear that the Hassett model was too good to be true. “A catastrophic miss,” as a former senior administration official briefed on the data described it. The president’s course would not be changed, however. Trump and Kushner began to declare a great victory against the virus, while urging America to start reopening businesses and schools.

The effort to prove the value of the epidemiological models done by people who are considered frauds within their actual profession of economics comes as the CDC’s own model showing an increase to 3,000 deaths a day was leaked. And the Council of Economic Advisors released this line-drawing exercise comes as the US has blown by Hassett’s original estimate of 60,000, one also adopted publicly by Trump.

Understand: This is not just an attempt to lie about the sanity of the decision to reopen the economy even as COVID cases continue to grow. It’s an attempt to lie about the stupidity of the economic decisions Trump made, too.

While other countries have had more cases per population, that has happened with economic relief focused on actual human beings rather than cruise lines and luxury hotels. Here, much of Trump’s economic policies have been just another attempt to loot the economy for his friends and campaign donors. That has made the economic impact of all this in the United States worse than it is in other countries, and it will only continue to get worse.

Some places that reopen prematurely will be forced to shut down again. And as more people are out spreading the virus, more bottle necks in critical infrastructure will be exposed.

Trump has pursued the worst of all policy options. After his initial dawdling let the virus spread in some cities, he endorsed shutting down the economy in an attempt to mitigate the pandemic. That had a predictable catastrophic impact on the economy (and more unemployment numbers will be out today). But because Republicans refused to adopt policies that would actually cushion that crash, the impact was much worse than it might have been.

Now, after taking the full hit of shutting down, Republicans are insisting on reopening — bolstered by their fraudulent charts and graphs — before the shutdown has any lasting epidemiological value. We’ll have the medical impact of a herd immunity approach, with the economic impact of a badly executed mitigation strategy. The worst of both options.

And to pretend that this is not all knowable and known now, Trump has swapped briefings by medical experts for photo ops set to campaign music, to the apt Live and Let Die.

Update: Meanwhile, Florida just removed details of possible positive COVID cases in January and February from a public website.

Long Overdue Policies that Look Obvious in the Age of Pandemic

I’m not usually a fan of George Packer. But I keep coming back to this column, We Are Living in a Failed State. The coronavirus didn’t break America. It revealed what was already broken, which is something I might have written. It argued that this pandemic, to which the US responded like a corrupt poor country, was actually the third crisis of this century, and our responses to the previous two — 9/11 and the Iraq War, and the Wall Street crisis — simply brought this country to the place where Trump could loot it.

Like a wanton boy throwing matches in a parched field, Trump began to immolate what was left of national civic life. He never even pretended to be president of the whole country, but pitted us against one another along lines of race, sex, religion, citizenship, education, region, and—every day of his presidency—political party. His main tool of governance was to lie. A third of the country locked itself in a hall of mirrors that it believed to be reality; a third drove itself mad with the effort to hold on to the idea of knowable truth; and a third gave up even trying.

Trump acquired a federal government crippled by years of right-wing ideological assault, politicization by both parties, and steady defunding. He set about finishing off the job and destroying the professional civil service. He drove out some of the most talented and experienced career officials, left essential positions unfilled, and installed loyalists as commissars over the cowed survivors, with one purpose: to serve his own interests. His major legislative accomplishment, one of the largest tax cuts in history, sent hundreds of billions of dollars to corporations and the rich. The beneficiaries flocked to patronize his resorts and line his reelection pockets. If lying was his means for using power, corruption was his end.

Packer ends with a call for renewed solidarity.

But he might as well also call for a fix to all the failures of the past twenty years. Right now, mind you, Trump is failing, miserably, in part because he believes maximizing the opportunities for looting by his friends is all the policy he needs.

But the sheer scale of the crisis makes policies that long made sense for the United States more urgent and far easier to justify. I plan to keep a running list of those policies.

Medicare for All

No one has figured out how all the people put out of work by the shut-downs will pay for COVID-related health care. Trump has persisted in a plan to kill Obamacare, and some badly affected states never even expanded Medicaid.

Early reports suggested that Trump’s administration has claimed it is willing to pay hospital bill, so long as they pay those bills directly (thereby avoiding establishing a policy, I guess). But with so many people out of work and with hospitals reeling from the shut-down, the far better solution is to make Medicare available to all.

Universal Basic Income

The US government has been backing credit for big industry and tried, but failed, to provide free money for small businesses to keep their employees on staff. Instead, 26 million Americans have applied for unemployment, a sixth of all workers (and a third of all workers in MI, KY, and RI). Meanwhile, the Administration botched even a one-time $1,200 payment.

The government could better ensure that markets don’t crash entirely–and keep states from buckling as they try to serve all these unemployed people–if they simply gave a UBI to all people, as Spain has decided it will do. By keeping it, the US might be able to address the underlying inequality problems that have led to such a disproportionate impact of COVID on communities of color.

Decarceration

Closed spaces, generally, amount for a huge percentage of COVID cases and (in the case of nursing homes) deaths. ACLU just rolled out a paper that argues the models for COVID (which were originally based off other societies’ social patterns, including their prison system) underestimate the total number of deaths because they don’t account for the spread in our prisons.

COVID will remain lethal for long enough that states and the federal government will need to achieve some level of decarceration to prevent the prisons from becoming a source of spread to the wider community (as they have become in the localities with harder hit prisons).

In this case, even before COVID hit, there was bipartisan support to wean ourselves from overincarceration. Prisons will become less lucrative in conservative communities, especially as some states begin to end prison gerrymandering (which gives rural communities representation for prisoners who can’t vote, just like slavery did).

So now is the time to end incarceration for minor crimes, and improve the humanity of incarceration for those who need to be jailed.

Deindustrialization of the Food System

We’ll be lucky if we avoid famine conditions. That’s partly because our food system has the same institutional/retail split our toilet paper supply chain does, meaning the market for half of the food out there disappeared when restaurants and other institutional buyers shut down. That’s partly because bottlenecks in our food supply chain — most notably, thus far, meatpacking plants, but there will be others — have further undermined the market for our plentiful food production. And that’s partly because Trump’s farmer support, thus far, has emphasized direct payments that are effectively a continuation of his earlier bribery of farmers whose markets his trade war screwed, rather than purchasing up surpluses to provide to food banks.

Trump hasn’t shown an ability to get any other needed supplies where they’re needed; it’s unlikely he’ll do better with food.

Meanwhile, food supplies that bypass these commodity markets remain. We need to make this food supply chain more resilient and one way of doing so is to bypass the industrial bottlenecks.

Broadband as a Utility

When schools shut down, it suddenly became acutely visible how many Americans — both rural and urban — don’t have broadband. While some areas have gerry-rigged solutions (like driving wifi-enabled busses to poorer neighborhoods) to get some kids online and learning, that’s not possible everywhere. And even for adults, it takes broadband access to be able to social distance.

Trump is already talking about using infrastructure investments to get America working again. Extending basic broadband as a utility should be part of that.

Update: Arne Duncan describes what needs to happen for existing efforts to expand broadband access to be really effective.

Industrial Policy

Two months after we first identified shortages in necessary medical supply, we’ve barely managed to switch production to those necessary objects, even as entire factories were otherwise shut down. We’ve got shortages of not just testing kits, but the underlying supplies. We’ve got drug shortages too (and had them, even before the President started pitching miracle cures).

It’s long past time to admit that we do have an industrial policy — but right now, it’s focused on building the troubled F-35, not ensuring that the United States has the ability to build the things we need domestically, even if we interact openly with the rest of the world. This story uses the failed lithium battery investments Obama made, largely in Michigan, to talk about how we came to be unable to supply our own medical equipment.

We have an industrial policy. We just need to be willing to match that policy to our society’s real needs, not exporting warmongering.

Three Things: Erasing, Erased, Erasure

[NB: check the byline, thanks! /~Rayne]

There are so many more than three different items under this theme, I could write a book about this. But in the interest of time and resources, I’ll opt for simplicity.

You are being erased if you haven’t been already.

~ 3 ~

Writer and former business consultant Anand Giridharadas shared an excerpt yesterday from a financial adviser’s newsletter to clients.

Transcript:

[…] I just got a great leak that I want to share with you from someone’s financial adviser. You may have a financial adviser. This is a financial adviser trying to advise people what would happen to America if Elizabeth Warren was elected president. And by the way I think a lot of this would apply to Bernie Sanders if he was elected president as well. I think there’s a similarity. And so what would a Warren presidency do to markets. I just want to read some of this to you because it really is hilarious obviously in a way that these boring people did not intend.

And um, so they say, “We have been getting increasing inquiries to address the potential market of her policies as she has gained a lot of momentum over the last couple of weeks.”

And um, it says, “To be clear we do not get involved in political opinions.” To be clear. “So we did a surface level dive on her platform,” they say, “and our intention is to understand the market implications,” they say, and I quote, “Many of these policies are designed specifically to reduce corporate profits and earnings, and instead use those funds to benefit number one workers, number two the environment, number three those with lower incomes, and number four,” oh gosh,”women and minorities. It is important to understand that Warren’s policy goal is to reduce the retained earnings of businesses across multiple sectors and to benefit other parties as mentioned above. As such it is very reasonable statement that if Warren were elected and those policies were enacted it would likely be negative for the stock market because stock prices are an expectation of future earnings.” And so on and so forth.

“The policies would hurt corporate earnings universally,” it says, “although they would likely improve quality of life for many demographics at the expense of corporate profits. Whether that trade-off is positive or negative is not our place to say.” People, stocks, which is better? We don’t know. “We are simply focused on facts. Again, we do not get involved in political opinions,” it said. So now they break it down in case this is not obvious enough, good for people, bad for, for uh, stocks, in case that’s not obvious enough they break it down by policies. Let’s just go through that, shall we? Is that okay? You got time? I got time. I’m in a hoodie.

“Number one ban fracking. Warren wants to ban fracking for oil and gas based on environmental concerns.” Now they do a nice thing where they do who’s this negative for, who’s this positive for, super helpful. “Negative for energy companies and indices, positive for the price of oil/gasoline, supply would be reduced.” Uh, that’s interesting.

“Policy number two eliminate private prisons. Warren wants to end federal contracts to private prisons and withhold funding to make state and local governments do the same. Materially negative for private prison stocks,” ooh, that would be rough for them, yeah.

“Reinstate Glass-Steagall. Warren wants to reinstate the law that separated commercial banking and investment banking. Negative for the major investment banks — JPM, MS, BAC, GS, et cetera, as they would likely have to spin off retail banking operations.

Policy number four, increase taxes on the wealthy. Warren is advocating an ultra-millionaire tax on the 75,000 richest families in the U.S. along with other tax increases aimed at high earners. This could reduce disposable income. Negative for consumer discretionary retail sectors and lingerie stocks. She wants to double the national minimum wage,” they say, “from $7.25 to $15.00. Negative for the entire stock market, the entire stock market,” well, then maybe some more people would be able to buy stocks. “And small business margins. This would significantly compress corporate margins across industries and would result in a reduction of expected earnings for the S&P 500. Those negative effects would be some partially offset,” it goes on, “by more disposable income from minimum wage earners.

“Number six, Warren supports the Family Act, which would create paid national family and medical leave for up to 12 weeks. Negative for small businesses. For large corporations, not much of an impact.” Uh, you know, there we go.

“Number seven agribusiness, breaking up agribusiness.” In fact maybe even break up the word agribusiness into two separate words, agri and business. “Most of the country’s and world’s meat and agriculture production is concentrated in a few major companies. Warren wants to break up these vertically integrated agriculture and food companies. Negative for the agriculture sector, companies in the ag stocks as well as pesticide producers.” And so on and so on.

“The bottom line from a market standpoint is that these policies will be negative for stocks with some being downright negative for the broad markets. How negative would they be for stocks? No one knows exactly.” But this is where it gets interesting. “Again, this doesn’t mean these policies don’t have winners. These are policies designed to reduce retained corporate earnings in favor of other things Warren and her supporters deem more important. So voters will decide if they want to support that type of trade-off. Everyone has their hierarchy of what’s important.”

This is where it gets, we’re getting into Kant here, this is philosophy here in a financial advisor’s report. You gotta pay extra to get to this paragraph. “Everyone has their hierarchy of what’s important, and Warren is an unapologetic populist, who if in power would enact policies designed to reduce corporate earnings to benefit other stakeholders,” parentheses, “workers, the environment, et cetera.” So, I think like all people and the planet are (air quotes) other stakeholders.

“Regardless of your opinion of that strategy it is important to understand that investment accounts would likely be negatively affected under these policies, and if they become reality, we need to take steps to mitigate that damage. As we move closer to the election we’ll obviously be keeping close watch on the implications of the Democratic primary giving you market intelligence on what the headlines mean for stocks going forward.”

They also want to reiterate that this is not political.

It boggles the mind to think that workers, the environment, women and minorities are just sucking drains on the audience for which this opinion piece was written.

We’re roughly 75% of citizens and the entire natural physical world but we’re just an inconvenience drawing down on corporate profits.

We’re not 75% of human beings who’ve been driven over roughshod, had our labor stolen from us for compensation less than subsistence, and the steadily destroyed environment which all of us share and in which we live.

How easily we are erased from consideration by the plutarchy.

One upside: now we know with certainty the financial industry views Warren as both a serious contender for the Democratic nomination and a threat.

Downside: we know, too, that in spite of their B-school education the financial industry is still as dumb as a box of rocks, likely to trash the entire economy and the planet, because they can’t see outside of the rut they’ve been in forever, where only white men have capital and make economies. They are incapable of seeing the untapped promise for stock market growth and saving our planet, locked within more than two decades of stagnant wages, monopsonic job markets, and millennia of toxic colonization.

Note how health care wasn’t at all mentioned; the financial sector is incapable of seeing the benefits to the broader markets if businesses were freed of the burden of health insurance shopping and premium payments.

~ 2 ~

In 1986 I worked for a small machining business. My boss was a bigoted lecher, I’ll be frank. It wasn’t unexpected when he told me if I got pregnant while I worked for him he’d fire me. Fortunately having kids wasn’t yet in the cards for me and I could afford to ignore his misogyny though I couldn’t afford to quit.

In 1988 I applied for a job with a business that did custom manufacturing. I was offered the job but turned it down because their health insurance didn’t cover women’s reproductive care or maternity coverage and they didn’t expect to offer it any time soon, especially since I’d be only one of two women on staff. I took a job with a Fortune 100 company instead; their plan had women’s reproductive care and maternity coverage.

In 1989 my supervisor at that same employer told my older female co-worker he had a limited amount of money to offer his department staff of 10, two of which were male. “I have to give the boys raises because they have families to support.” Never mind that this older woman had teenagers at home, or that the rest of us junior female staff members assisted these two male staffers, or that we might have wanted families we couldn’t yet afford.

In 1993 I got pregnant the month the company fired my supervisor’s equally misogynist boss. I swear the egg waited to drop until I had a new female department head. She was understanding and considerate even though she’d never had any kids of her own.

In 1997 after three years in a new department, I became pregnant with my second child. My boss was itchy and weird throughout my pregnancy, increasingly so over time. You’d think a lawyer would know better than to ask every week during my seventh and eighth month when I was due and was I going to go on leave soon. I had to go to HR to ask for an intervention; I left a week before my scheduled delivery.

It’s not just my own experience; my sister ran into friction from her Fortune 500 employer while she was pregnant. Thankfully she had support from both HR and her union — just not the men she worked with. I can’t tell you how many female friends have likewise been harassed at work for being pregnant.

Don’t get me started about simple systemic problems. Ever tried to sit in one of these for several hours while eight months pregnant?

Academic Chair-Desk

When Elizabeth Warren said she was fired when her pregnancy became visible, I believed her. I am furious with news media outlets for entertaining the idea this was ever not true, or that this isn’t a continuing problem today.

[Let’s not forget the outlet which propelled the attack on Warren was the same one which was tasked with the original Trump dossier — Washington Free Beacon. Are they using material from a Warren dossier?

Let’s not forget, too, that outlets like CBS which continued to poke at Warren have had a wretched history of treating women poorly — or has everyone already forgotten Les Moonves and his nasty habits, including blackballing Janet Jackson for a wardrobe malfunction?]

Think back upon your education and work experience; how many times during K-12 education do you recall seeing a pregnant teacher? I never did any time between 1965 and 1978, and more than 85% of the teachers I saw were female, most of childbearing age. I don’t recall seeing a pregnant instructor during college at all.

How many times did you see a pregnant woman in the workplace? I didn’t until I was in my 30s and having kids myself.

And now my daughter has to put up with crap regarding reproductive health coverage, more than 30 years after I had to turn down a job for not having it as part of their benefits. Why has this not changed for the better? Why is it worse because our government  has now butted into the mix to make it worse rather than ensuring we all get the health care we need regardless of gender?

Why is the essential human fact that women need reproductive care or maternity coverage still something we must fight for against the plutocratic patriarchy which wants to deny it and erase us?

~ 1 ~

There’s a theory that stingy millennials are to blame for the sluggish economy, said financial news network CNBC, parroting investment firm Raymond James.

Are you fucking kidding me?

When 40% of Americans can’t muster $400 cash for an emergency, it’s not stinginess that they aren’t stimulating the economy.

When the reason so many Americans are strapped is because of debt, it’s not stinginess.

When 45 million American students and parents hold educational debt amounting to  ~$1.5 trillion — more than what Americans owe on their credit cards or auto loans — it’s not stinginess.

When minimum wage workers across the entire country can’t afford rent on 2-bedroom apartment, it’s not stinginess.

When 25% of Americans ages 18-64 report having problems paying medical bills, it’s not stinginess.

Somehow the financial sector including media dedicated to covering it have erased all the other reasons why millennials — Americans born between 1981-1996 (23-38 years old) — might not be able to fully participate in stimulating the economy.

Conveniently, the several hundred uber wealthy families represented at the far right of the interactive graphic in the tweet below don’t worry at all about erasure.


They own the erasers.

~ 0 ~

This is an open thread.

The Orange Injector and the Troubling Tariffs

[NB: Check the byline, thanks. /~Rayne]

He did it again. I am so fed up with this nonsense. This:

is yet another perfect opportunity for someone to game the market and do so in a big way.

Just look at this drop:

One needed only to short the market before it opened on Monday make huge amounts of money with no effort. And this time even the entire American market could have jumped on this; no more advance notice required apart from Trump’s Sunday and Monday tweets.

Believe me, the opportunity tempted me. I could see it coming. I only needed to short the NYSE:DIA using my pre-open trading access and I’d have raked in cash.

But it’s unethical; I can’t make money off people on the wrong side of Trump’s ridiculous foreign policy. It’s more like gambling on a steroid-doped horse and not true investment.

Nothing about Trump’s trade policy makes any sense (not that anything he does makes sense to a rational, ethical, sentient human being). What is the fundamental problem he wants to solve?

…Trump withdrew from the Trans-Pacific Partnership without ever proposing a replacement, and he appeared ready to do the same with the North American Free Trade Agreement (NAFTA). He imposed stiff levies on imported steel and aluminum, leading Canada, China, Mexico, and the European Union to slap the United States with retaliatory tariffs. At the same time, however, his administration ultimately agreed to a renegotiated NAFTA without major changes to the original agreement. It did the same for the U.S. free trade agreement with South Korea. So what signs could reveal his true intentions in 2019?

(source: Understanding Trump’s Trade War by Doug Irwin via Foreign Policy Winter 2019)

This entire paragraph operates on the assumption Trump acted in good faith on NAFTA.

This is the biggest mistake anyone can make about Trump, however. He has never done anything altruistic in his life. Every he’s done has been transactional. His lack of empathy for others combined with his selfish transactional nature precludes any good faith.

One need only look at his marriages to see his true self. He didn’t make any concerted effort to keep his vows, and when he’d obtained all he wanted from those relationships, he ditched his wives.

Even his Access Hollywood “grab them by the pussy” video revealed this: he believes that if one is a celebrity, one can do anything to a woman. In other words, the woman is receiving the attention of a celebrity in exchange for access to her body.

A transaction. Presence and access is consent as far as he’s concerned.

He is incapable of seeing anything he does as president as action on behalf of the country. In his mind the country already got what it wanted — his attention of a celebrity and his commitment to live in our house.

Rather like a second or third wife, we’re supposed to have gone into this relationship with our eyes open and have already received the best that we’ll get out of this deal. Meanwhile, he’s using our house for his personal aims.

And he’s using our relationship with major trading partners to shake them down for something to his benefit.

Re-read that paragraph from Foreign Policy again, only this time recognize the shakedown, the grift in between the lines. He received something from rattling NAFTA partners even if in the end it looks like nothing changed.

The New York Times published another expose on Trump’s finances based on transcripts of his IRS filings from 1985 to 1994. In the wake of the article there’s been a lot of chatter about how deeply in debt he was during the period these filings covered. But debt is just a number; it’s all in the accounting. The average American under the age of 40 is also deeply in debt if they’re buying a home, a car or two, and/or paying off the last of their tuition debt. Some of these debtors may tell you they made money and put it in the bank last year, though.

Trump was doing the same thing but at a much larger scale, only without the same consequences upon failure the average American would face:

Mr. Trump was able to lose all that money without facing the usual consequences — such as a steep drop in his standard of living — in part because most of it belonged to others, to the banks and bond investors who had supplied the cash to fuel his acquisitions. And as The Times’s earlier investigation showed, Mr. Trump secretly leaned on his father’s wealth to continue living like a winner and to stage a comeback.

Here’s the bit that jumped out at me from the NYT’s piece:

As losses from his core enterprises mounted, Mr. Trump took on a new public role, trading on his business-titan brand to present himself as a corporate raider. He would acquire shares in a company with borrowed money, suggest publicly that he was contemplating buying enough to become a majority owner, then quietly sell on the resulting rise in the stock price.

The tactic worked for a brief period — earning Mr. Trump millions of dollars in gains — until investors realized that he would not follow through. That much has been known for years. But the tax information obtained by The Times shows that he ultimately lost the bulk of the gains from his four-year trading spree.

Now Trump — or any of his partners/associates/financiers — no longer has to buy stock in a specific company to make money. He can use our house to act like a corporate raider. He can threaten to make or break a deal using the good faith and credit of the United States (instead of his own bad faith) and mess with the entire market.

In addition to Trump’s Sunday tweets. I suspect participants in the US and overseas markets in Asia and Russia could also have traded on Trump’s early Monday morning tweet:

This tweet is pure bullshit. There is nothing factual about it; it displays a gross ignorance about the trade deficit.

Putting aside the rational explanations about the trade deficit, the U.S. must keep in mind that China has been carefully negotiating its recovery after Mao Tse-tung’s Great Leap Forward and a realignment of mixed capitalist-communist system. It would be all too easy for the balance to shift reactively toward a more militarized communist system if it had an insufficient demand for its capitalist output.

But understanding this requires a degree of nuance beyond the grasp of the malignant narcissist-in-chief. He can only manage to ponder what’s in it for him.

Trump’s early Monday morning tweet would have been seen at these local times:

4:06 am Washington DC
6:06 pm Sydney Australia
5:06 pm Tokyo Japan
5:06 pm Seoul South Korea
4:06 pm Beijing PRC
11:06 am Moscow Russia

Ample time to jump in between the Sunday tweets and this Monday tweet if one was already holding index shares.

Those of use who didn’t trade on this information, though, went for a roller coaster ride on our hard-earned retirement savings and college funds as they plummeted Monday morning.

And because Trump is using our good faith and credit for his own aims, we can’t be absolutely certain he isn’t running some opaque con for a personal gain we know nothing about. We’re trapped in this vehicle for as long as he wants to run this scam.

And like some of the investors who loaned him money or contractors who worked for him in good faith in the past, we’ll end up holding the bag.

Just stop this crazy thing.

~ ~ ~

Oh, two more things:

First, Steve Bannon needs to be de-platformed. He is deliberately sowing anarchy across the globe by promoting white nationalism. Populism, he calls it, but it’s racist appeals encouraging insurrection and sedition against liberal democracy.

When he encourages Trump’s stupidity toward China it’s not because it’s helpful to the common good. He may say that Trump’s tariff threats are a benefit to the working class but Bannon has no fucking clue how manufacturing actually works. It’s all an abstraction to him that capital might reshore from investment in China to investment here.

Reality looks more like Lordstown, Ohio where General Motors just shut down a plant. The economic changes that led to the closure have been years in the making. It takes years and hundreds of millions in capital investment to plan a new product line to respond to trends in consumers’ tastes including the manufacturing processes required. We’re also in the midst of a massive sea change in transportation, with competing countries shifting entirely to electric cars within the next two decades.

But Trump can tweet damaging nonsense in seconds, smashing those carefully laid-out product manufacturing plans to smithereens.

Which may be the point considering Trump and his minions and financial backers are no fans of organized labor in the U.S.

I’m sure Bannon will assure the workers of Lordstown jobs will be there for them at any moment once the impending trade war with China has settled.

[Note: While I was drafting this post Trump tweeted that GM was selling the Lordstown plant to electric truck manufacturer Workhorse. Now Trump will look like a winner for badgering GM’s CEO Mary Barra when this deal was likely in the offing for some time. Really stupid move on Barra’s part because now he’ll use this as leverage — her call gave him presence and access.]

 

Second, it may be valuable to note that key problem children who have supported anarchic white nationalism through Trumpism in the US and Brexit in the UK have something in common:

Steve Bannon = former investment banker

Robert Mercer = former co-CEO of hedge fund

Rebekah Mercer = former trader at daddy’s hedge fund

Nigel Farage = former commodities trader

Arron Banks = owner, insurance company

Wilbur Ross = investment banker

Steve Mnuchin = former mortgage securities and hedge fund executive

Imagine them realizing they could make a shit ton of money by injecting planned volatility into the market using Trump (or Brexit) as their injector.

I wouldn’t be surprised if the entire Trump administration was in on this scam. Here’s U.S. Trade Reprepresentative Robert Lighthizer about Trump’s latest tariffs on Chinese goods:

“This was Trump acting out on a rainy Sunday in Washington with nothing on the public schedule,” he added. “To paraphrase Lenin: there are decades where nothing happens and there are weeks when decades happen…and then there is a single week in the Trump Presidency. What a time to be alive.”

Head, meet desk.

This is an open thread.

Graphic: Quino Al via Unsplash (mod by Rayne)

Three Things: This Ain’t No Fooling Around

[NB: The byline, check it as always. /~Rayne]

It may be April Fool’s Day but this isn’t a joke. We have some serious matters to tackle urgently today. Let’s get to them pronto.

But first, write down this number or add it to contacts, you’re going to need it:
Congressional switchboard (202) 224-3121

~ 3 ~
Mitch McConnell is expected to bring a Senate rule change to a vote, possibly today; he wants to shorten the amount of time for the Senate to debate nominees before approval 30 from hours to 2 hours. This move was approved by the Senate Rules Committee along party lines and is horribly anti-democratic (little d) as it provides an inadequate amount of time for both senators and their constituents to air problems with nominees and evaluate their suitability for office, which in some cases are lifetime appointments.

McConnell, the man who refused to allow a vote on an Obama SCOTUS nominee, claimed this rule change was necessary because of “‘unprecedented obstruction’ by Democrats.” What amazing projection.

The media also did a pissy job informing the public about this change.

Call your senators, tell them to vote NO on SRes 50. This rule change is unacceptable. You need to know they are fulfilling their role to advise and consent — and that role doesn’t mean rolling over and doing the White House’s bidding. If they don’t fully debate nominees’ qualifications, why do we even need the Senate?

~ 2 ~
And now for the perfect example why the previous rule change is unacceptable: Stephen Moore, economics hack extraordinaire, deadbeat father, and one of the reasons the GOP members of Congress have been especially jacked up since January 2017. McConnell doesn’t want a full debate about him.

This guy is Trump’s nominee for the Federal Reserve and he’s completely out of his depth. I’ll point you to economist Justin Wolfers for details, though — start at the top of his Twitter thread (click on the dte to open it):

And here:

Back when the 115th Congress was sworn in, the House GOP caucus was corralled into a closed door session. Few details have emerged but we know Moore was used to persuade the caucus members they were “no longer the party of Reagan” because popularism. This laid the opening for the POS tax cuts passed last year which were supposed to lead to all kinds of economic growth due to reinvestment. Psych! It was either a massive snow job by Moore on behalf of corporations or it was utter stupidity about the stickiness of corporate profits (they go into shareholders’ pockets, not reinvestment into workers or equipment).

If we ignore the red flags waving about Moore — including a $75,000 tax lien for 2014 income — the ridiculousness of the tax cuts points to Moore’s unsuitability for the Fed Reserve. He’s a complete hack who offers little more than a front to which the GOP can point to legitimize their ransacking the country.

Call your senators: No on Moore for Federal Reserve.

~ 1 ~
This sums up the problem:

A senior administration official with direct knowledge of the meeting described Trump’s stance: “He doesn’t want another single dollar going to the island.”

Puerto Rico is still in very bad shape 19 months after Hurricane Maria devastated the island. I can’t begin to do the scale of the additional problems inflicted on Puerto Ricans by the horrible management of financial aid. Please read this piece at the Washington Post for a better take on how bad things are:

Puerto Rico faces food-stamp crisis as Trump privately vents about federal aid to Hurricane Maria-battered island

The Bigot-in-Chief continues his deadly vendetta against Puerto Rican Americans still badly affected by Hurricane Maria’s devastation. He doesn’t want to send them any additional aid for reasons which are opaque to the rest of the country but are readily guessed at based on his past behavior.

He couldn’t bother to do adequate pre-hurricane preparation; he sat on his goddamn fat ass and bitched about NFL players taking a knee rather than get off his ass and make sure Puerto Rico was prepared. We know he had ample time and instead he was either malignant in his duties or incompetent, take your pick.

— He had to be shamed by Hillary Clinton into dispatching the Navy’s hospital ship. The ship did not treat as many patients as it should have nor did it stay long enough. At least one entire ICU ward on the island died because medical attention didn’t get to the most obviously needy places fast enough.

— Under his watch management of disaster recovery services was totally botched, from water bottles sitting on the tarmac undelivered to electrical service contracts let to what appears were profiteering outfits unprepared to deal with the scale of the problems. So much money was wasted because of this gross incompetence.

— Too little attention was given to Puerto Rico’s businesses as critical national infrastructure. The entire country faced medical supplies shortages because manufacturers in PR were the only sources in the U.S. and they were ignored rather than treated as essential.

Three thousand Americans died after the hurricane; most of them died because of the fucked up and opaque personal agenda Trump has against Puerto Rico. More people may have been affected here on the mainland but I’ll bet there’s no way to record the impact.

Me, for example — I had to manipulate the schedule for major surgery back in early 2018 because the hospitals here in Michigan were reporting tight supplies of IV equipment made in Puerto Rico. Thank goodness it worked out, that I didn’t have another episode requiring transfusions and days of IVs. But I couldn’t help think of patients elsewhere across the country who were negatively impacted; there were reports of reusing disinfected IV equipment because supplies had run out.

Trump thinks Puerto Rico has received too much money already. I suspect Trump’s real issues are:

1) He has a personal bias against Puerto Rico because a Trump-branded golf course there failed in 2015;
2) He simply hates brown and non-English speaking people — just look at how he responds to situations where persons of color need help versus whites;
3) He doesn’t see Puerto Rico as part of the U.S.

American persons of color are highly aware of the treatment of Puerto Rico. How the White House and Congress respond to Puerto Rico shapes their opinion, and failure to do right by Puerto Ricans can affect these voters’ attitudes going into 2020.

But Puerto Ricans don’t have a senator, one might say. True — but it’s estimated 6% of the population left the island after the hurricane and more may still leave. They’ve been moving to Illinois, Texas, Louisiana, Florida, Georgia, Kentucky, and Wisconsin because it’s cheaper to live in these states than it is now in Puerto Rico. What a pity for GOP senators in those states up for re-election in 2020 who continue to vote against aid for Puerto Rican recovery — they’ll have more Democratic voters to contend with at the polls.

Call your senators — tell them to ensure Puerto Rico has more financial assistance for post-hurricane recovery. We owe it to our fellow Americans just as we would if they were in North Carolina, Florida, Texas, or California after a major disaster. We owe them for the failure to provide equal protection under the law before, during, and after the hurricane resulting in nearly as many Americans’ deaths as 9/11.

~ 0 ~
Lock and load, people, this ain’t no disco. Roll out to the phones. When you’re done you can use this as an open thread.

P.S. For those of you who aren’t on broadband or have challenges making calls, try sending a fax to your members of Congress. There are sites on line which offer free faxes to Congress; my personal favorite is FaxZero.com as they have the numbers for each member already listed. Just type up a short note — be sure to included your real name and address so they can verify your residency in their district/state — then follow the instructions at the site. I keep a blank letterhead template with address header for each of my members of Congress just for this purpose. All I have to do is fill in the body and send. I have a nice copy in my records of what I sent and when. But do keep in mind these fax services will send an email immediately after you press Send to validate your email address. Check the link the fax service emails before confirming.

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